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Relative Cohort Size, Relative Income, and Women's Labor Force Participation 1968-2010

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  • Macunovich, Diane J.

    () (University of Redlands)

Abstract

Relative cohort size – the ratio of young to prime-age adults – and relative income – the income of young adults relative to their material aspirations, as instrumented using the income of older families their parents' age – have experienced dramatic changes over the past 40 years. Relative cohort size has been shown to cause a decline in men's relative wages – the wages of young relative to prime-age workers – due to imperfect substitutability, and the results here show that this applies perhaps even more strongly to women's relative – and absolute – starting wage. Relative cohort size first declined by 30% and then increased by 47%. Results here show that those changes explain about 60% of the declines in women's starting wage – both relative and absolute – in the first period, and 100% of its increase in the second. Relative income is hypothesized to affect a number of demographic choices by young adults, including marriage, fertility and female labor force participation, as young people strive to achieve their desired standard of living. Older family income – the denominator in a relative income variable – increased by 58.6% between 1968 and 2000, and then declined by 9%. Its changes explain 66% of the increase in the labor force participation of women in their first five years out of school between 1968 and 2000, and 75% of its decline thereafter. The study makes use of individual-level measures of labor force participation, with instrumented wages, and employs the lagged income of older families in a woman’s year-state-race-education group to instrument parental income and hence material aspirations.

Suggested Citation

  • Macunovich, Diane J., 2011. "Relative Cohort Size, Relative Income, and Women's Labor Force Participation 1968-2010," IZA Discussion Papers 5913, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5913
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    References listed on IDEAS

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    1. Chinhui Juhn & Simon Potter, 2006. "Changes in Labor Force Participation in the United States," Journal of Economic Perspectives, American Economic Association, vol. 20(3), pages 27-46, Summer.
    2. John Pencavel, 1998. "The Market Work Behavior and Wages of Women: 1975-94," Journal of Human Resources, University of Wisconsin Press, vol. 33(4), pages 771-804.
    3. Josh Angrist, 2002. "How Do Sex Ratios Affect Marriage and Labor Markets? Evidence from America's Second Generation," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 997-1038.
    4. Galor, Oded & Weil, David N, 1996. "The Gender Gap, Fertility, and Growth," American Economic Review, American Economic Association, pages 374-387.
    5. Easterlin, Richard A & Macdonald, Christine & Macunovich, Diane J, 1990. "How Have American Baby Boomers Fared? Earnings and Economic Well-Being of Young Adults, 1964-1987," Journal of Population Economics, Springer;European Society for Population Economics, vol. 3(4), pages 277-290, December.
    6. Quinlan, Daniel C & Shackelford, Jean A, 1980. "Labor Force Participation Rates of Women and the Rise of the Two-Earner Family," American Economic Review, American Economic Association, pages 209-212.
    7. Shoshana Grossbard & Catalina Amuedo-Dorantes, 2008. "Cohort-level sex ratio effects on women’s labor force participation," Review of Economics of the Household, Springer, vol. 6(3), pages 309-309, September.
    8. Sherwin Rosen, 1992. "Distinguished Fellow: Mincering Labor Economics," Journal of Economic Perspectives, American Economic Association, vol. 6(2), pages 157-170, Spring.
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    More about this item

    Keywords

    women's labor force participation; relative income; relative cohort size; sex ratio; women's hours worked;

    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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